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LAWS OF MALAYSIA
REPRINT

Act 264

FINANCE ACT 1982

Incorporating all amendments up to 1 January 2006

PUBLISHED BY
THE COMMISSIONER OF LAW REVISION, MALAYSIA
UNDER THE AUTHORITY OF THE REVISION OF LAWS ACT 1968
IN COLLABORATION WITH
PERCETAKAN NASIONAL MALAYSIA BHD
2006

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2 Laws of Malaysia ACT 264
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FINANCE ACT 1982

Date of Royal Assent … … … … ... 23 January 1982

Date of publication in the Gazette … … … 28 January 1982

PREVIOUS REPRINT

First Reprint … … … … … 2001

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LAWS OF MALAYSIA

Act 264

FINANCE ACT 1953

ARRANGEMENT OF SECTIONS

CHAPTER I

PRELIMINARY

Section

1. Short title and commencement

2. Amendment of Acts

CHAPTER II

AMENDMENTS TO THE INCOME TAX ACT 1967

3. Commencement of amendments to the Income Tax Act 1967

4. Amendment of section 6B
5. Amendment of section 54
6. Amendment of section 54A
7. New section 54B
8. Amendment of section 60
9. New section 60B and renumbering of section 60B as section 60C
10. Amendment of section 103
11. Amendment of Schedule 1
12. Amendment of Schedule 6

CHAPTER III

AMENDMENTS TO THE REAL PROPERTY GAINS

TAX ACT 1976

13. Commencement of amendments to the Real Property Gains Tax Act

1976
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Section

14. Amendment of Schedule 2

15. Amendment of Schedule 5

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LAWS OF MALAYSIA

Act 264

FINANCE ACT 1982

An Act to amend the Income Tax Act 1967 and the Real Property
Gains Tax Act 1976 and to provide for matters connected therewith.

[ ]

BE IT ENACTED by the Seri Paduka Baginda Yang di-Pertuan

Agong with the advice and consent of the Dewan Negara and
Dewan Rakyat in Parliament assembled, and by the authority of
the same, as follows:

C HAPTER I

PRELIMINARY

Short title and commencement

1. This Act may be cited as the Finance Act 1982 and shall have
effect or be deemed to have effect as provided in this Act.

Amendment of Acts

2. The Income Tax Act 1967 [Act 53] and the Real Property
Gains Tax Act 1976 [Act 169] are amended respectively in the
manner specified in Chapters II and III.

C HAPTER II

AMENDMENTS TO THE INCOME TAX ACT 1967

Commencement of amendments to the Income Tax Act 1967

3. (1) Except for section 10, the provisions of this Chapter shall
have effect for the year of assessment 1982 and subsequent years
of assessment.

(2) Section 10 shall be deemed to have come into force on

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Amendment of section 6B

4. Section 6B of the Income Tax Act 1967 [Act 53], which in

this Chapter is referred to as “the principal Act”, is amended by
deleting the words “calculated on term loan basis” appearing in
subsection (1).

Amendment of section 54

5. Section 54 of the principal Act is amended by inserting

immediately after the words “Subject to section 54A” appearing in
paragraph (2)(a) the words “or section 54B”.

Amendment of section 54A

6. Section 54A of the principal Act is amended—

(a) by substituting for the words “for a period of twelve
years of assessment” appearing in paragraph (1)(a) the
words “for twelve years of assessment (hereinafter referred
to as the exemption period) commencing from the year
of assessment 1982 or in the case of a company whose
first basis period ends after 31 December 1981”;
(b) by substituting for the word “ten” appearing in paragraph
(2)(a) the word “fifteen”;
(c) by substituting for paragraphs (2)(c) and (d) the following
new paragraphs (c) and (d):
“(c) during every four consecutive basis periods for
the exempt years of assessment (hereinafter referred
to as the relevant period) the company shall
undertake a programme to increase the tonnage of
its fleet of ships or vessels and shall for this purpose
incur capital expenditure on the acquisition of
ships or vessels which shall not be less than seventy-
five per cent of such fleet acquisition reserve as
at the end of the relevant period:

Provided that if at the end of the twelve year

period where a person has incurred capital
expenditure on the acquisition of ships or vessels
of not less than seventy-five per cent of the total
fleet acquisition reserve, he shall be entitled to the
full exemption specified in paragraph (1)(a); and
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(d) where at any time during a relevant period any of
the conditions have not been complied with or
where the Director General is of the opinion that
any expenditure deemed to have been incurred
has not in fact been incurred, this section shall be
deemed never to have had effect for that relevant
period.”; and

(d) by adding immediately after subsection (2) the following

new subsection (3):
“(3) For the purposes of this section, capital
expenditure is deemed to have been incurred—
(i) when expenditure is made;
(ii) on the signing of a contract for the purchase of a
ship or vessel; or
(iii) when a similar commitment is undertaken and it
is proved to the satisfaction of the Director General
that such commitment is for the actual purchase
of a ship or vessel.”.

New section 54B

7. The principal Act is amended by inserting immediately after

section 54A the following new section 54B:

“Abatement of chargeable income of resident companies

carrying on sea transport undertakings

54 B . (1) (a) Subject to the conditions referred to in

subsection (2), a company shall have its chargeable income in
respect of a business of transporting passengers or cargo by
sea to which paragraph 54(2)(a) applies (hereinafter referred
to as that business) abated by fifty per cent for twelve years
of assessment (hereinafter referred to as that period) commencing
from the year of assessment immediately following the expiration
of its exemption period under section 54A; and

(b) as soon as any amount of the chargeable income of that

business has been abated, it shall be credited to an account
(that account being referred to as the exempt account) and
paragraph 5 (except sub-paragraph (1) thereof) and paragraph
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paragraphs to any income exempted or which has become
exempt under paragraph 3 were a reference to income credited
to the exempt account.

(2) (a) The total dividend (including any dividend paid

out of the exempt account) paid, credited or distributed in a
basis period shall not exceed fifteen per cent of the paid up
capital as at the first day of such basis period;
(b) any excess of the audited net profit for the basis period
over such dividend less any tax payable for that year of assessment
shall be credited to a fleet acquisition reserve which shall not
be reduced other than for the purposes of paragraph (c);
(c) during that period the company shall undertake a
programme to increase the tonnage of its fleet of ships or
vessels and shall for this purpose incur capital expenditure on
the acquisition of ships or vessels which at the end of every
four consecutive basis periods (hereinafter referred to as the
relevant period) shall not be less than seventy-five per cent of
such fleet acquisition reserve; and
(d) where at any time during a basis period any of the
conditions have not been complied with or where the Director
General is of the opinion that any expenditure deemed to have
been incurred has not in fact been incurred, this section shall
be deemed never to have had effect for that relevant period.

(3) For the purposes of this section, capital expenditure is

deemed to have been incurred—
(i) when expenditure is made;
(ii) on the signing of a contract for the purchase of a ship
or vessel; or
(iii) when a similar commitment is undertaken and it is
proved to the satisfaction of the Director General that
such commitment is for the actual purchase of a ship
or vessel.”.

Amendment of section 60

8. Section 60 of the principal Act is amended—

(a) by substituting for subsection (2) the following new
subsection (2):
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“(2) For the purposes of this section—
(a) subject to paragraph (b), where an insurer
carries on life business in conjunction with
general business, the life business and the
general business shall be treated as separate
insurance businesses;
(b) (i) where an insurer carries on inward re-
insurance business, the inward re-insurance
business and the general business
(excluding the inward re-insurance business
and offshore insurance business) shall be
treated as separate general businesses;
(ii) where an insurer carries on offshore
insurance business, the offshore insurance
business and the general business
(excluding the offshore insurance business
and inward re-insurance business) shall
be treated as separate general businesses.”;

(b) by inserting immediately after subsection (5A) the following

new subsection (5B):

“(5B ) The adjusted income for the basis period for

a year of assessment from the offshore insurance
business of an insurer resident for that basis year for
that year of assessment shall consist of an amount
arrived at by applying subsection (5) as if references
therein to “general business” and “general policies ”were
references to “offshore insurance business” and “offshore
insurance policies” respectively.”;

(c) by inserting immediately after subsection (6A) the following

new subsection (6B):

“(6B ) The adjusted income for the basis period for

a year of assessment from the off-shore insurance
business of an insurer not resident for the basis year
for that year of assessment shall, where that business
is wholly or partly carried on in Malaysia, consist of
an amount arrived at by applying subsection (6) as if
references therein to “general business” and “Malaysian
general policies” were references to “offshore insurance
business” and “offshore insurance policies”
respectively.”; Adam Haida & Co
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(d) by substituting for the words “or (6A)” appearing in the
proviso to subsection (7) the words “, (6A) or (6B)”;
(e) by substituting for the words “and in section 60A” appearing
in subsection (11) the words “, section 60 A and
section 60B”; and
(f) by substituting for the full stop at the end of the definition
of “Malaysian general policy” and “Malaysian life policy”
in subsection (11) a semicolon and by adding immediately
thereafter the following new definitions:

“ “offshore insurance ” means insurance of a risk under

a general policy where the risk is outside Malaysia and
the policy of insurance is issued by an insurer resident
in Malaysia or by a branch in Malaysia of an insurer not
resident in Malaysia, and where any risk is in transit in
Malaysia it shall be deemed to be outside Malaysia;

“offshore insurance policies ” means policies issued in

respect of offshore insurance.”.

New section 60B and renumbering of section 60B as section 60 C

9. The principal Act is amended—

(a) by inserting immediately after section 60A the following
new section 60B:

“Offshore insurance: chargeable income, reduced rate

and exempt dividend

60B. (1) (a) Where an insurer carries on offshore insurance

business in conjunction with other insurance businesses,
the part of the chargeable income for a year of assessment
which is attributable to that offshore insurance business
shall consist of an amount which bears the same proportion
to the chargeable income for that year of assessment of
the insurer as the part of the aggregate income which
relates to the offshore insurance business bears to the
whole of the aggregate income for that year of assessment
from all sources of the insurer; and
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(b) the amount arrived at under paragraph (a) shall be
treated as the chargeable income for a year of assessment
of an insurer from offshore insurance business for the
purposes of paragraph 3 of Part I of Schedule 1.

(2) As soon as any amount of chargeable income from

the offshore insurance business of an insurer (being a
company) resident for the basis year for a year of assessment
has been subject to income tax at the rate of five per
cent—
(a) the net amount of that income (after deduction of
such tax) shall be credited to an account (that
account and company being referred to as the
exempt account and the relevant company
respectively); and
(b) paragraph 5 (except subparagraph (1) thereof) and
paragraph 6 of Schedule 7A shall apply as if any
reference in those paragraphs to any income
exempted or which has become exempt under
paragraph 3 were a reference to income credited
to the exempt account.”; and

(b) by renumbering the existing section 60B as section 60c.

Amendment of section 103

10. Section 103 of the principal Act is amended by substituting

for subsection (5A) the following new subsection (5 A):

“(5A) Where the tax due and payable has been increased
under subsection (4) or (5) any balance remaining unpaid
upon expiration of sixty days from the date of such increase
shall without any further notice being served be further increased
by a sum equal to five per cent of the balance unpaid, and
that sum shall be recoverable as if it were tax due and payable
under this Act.”

Amendment of Schedule 1

11. Part I of Schedule 1 to the principal Act is amended by

inserting immediately after the words “inward re-insurance business”
appearing in paragraph 3 the words “or offshore insurance business”.
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Amendment of Schedule 6

12. Paragraph 33 of Part I of Schedule 6 to the principal Act is

amended—
(a) by deleting the words “carrying on the business of banking”
appearing after the words “for a year of assessment”;
(b) by inserting immediately after the words “credited by
any person” the words “(whether the same person or
not)”; and
(c) by substituting for the full stop at the end of that paragraph
a colon and by inserting immediately below that paragraph
the following new proviso:

“Provided that the exemption under this paragraph shall

not apply to interest paid or credited on funds required
for the purposes of maintaining net working funds as
prescribed by the Central Bank of Malaysia in pursuance
of section 14 of the *Banking Act 1973 [Act 102]. ”

CHAPTER III

AMENDMENTS TO THE REAL PROPERTY GAINS

TAX ACT 1976

Commencement of amendments to the Real Property Gains

Tax Act 1976

13. (1) Except for paragraph 14(i), the provisions of this Chapter
shall be deemed to have come into force on 23 October 1981.

(2) Paragraph 14(i) shall be deemed to have come into force on

7 November 1975.

Amendment of Schedule 2

14. Schedule 2 to the Real Property Gains Tax Act 1976

[Act 169], which in this Chapter is referred to as “the principal
Act”, is amended—
(a) by deleting the words “(including the compulsory
acquisition under any law)” appearing in paragraph 2;
* NOTE—The Banking Act 1963 [Act 102] has since been repealed by the Banking and Financial
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(b) by inserting the words “the transfer of assets between
spouses or” immediately before the words “the transfer
of assets” appearing in subparagraph 3(b);
(c) by substituting for the full stop appearing at the end of
subparagraph 3(e) the word “; or”;
(d) by inserting immediately after subparagraph 3(e) the
following new subparagraph (f):
“(f) the disposal of an asset as a result of a compulsory
acquisition under any law.”;
(e) by substituting for the full stop appearing at the end of
subparagraph 9(d) the word “; or”;
(f) by inserting immediately after subparagraph 9(d) the
following new subparagraph (e):
“(e) where subsection 25(2) applies.”;
(g) by substituting for subparagraph 17(1) the following new
subparagraph (1):

“(1) Subject to this paragraph, where with the prior

approval of the Director General—
(a) an asset is transferred between companies in the
same group to bring about greater efficiency in
operation for a consideration consisting of shares
in the company or substantially of shares in the
company and the balance of a money payment;
(b) an asset is transferred for any consideration between
companies in any scheme of reorganization,
reconstruction or amalgamation; or
(c) an asset is distributed by a liquidator of a company
and the liquidation of the company was made under
a scheme of reorganization, reconstruction or
amalgamation:

and the transferee company is resident in Malaysia, the

transfer shall be treated as a disposal on which the transferor
company or the liquidator receives no gain and suffers
no loss:
Provided that no approval shall be given for any transfer
or distribution of asset in any scheme under subparagraph
(1)(b) or (1)(c) unlessAdam
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that such an asset is transferred to implement any such
scheme directly connected with any transfer or distribution
of ownership of an asset in Malaysia to a company resident
in Malaysia in compliance with Government policy on
capital participation in industry.”;

(h) by substituting for subparagraph 19(5) the following new

subparagraph (5):

“(5) Where an asset which has been transferred under

paragraph 3(b) is subsequently disposed of by the spouse
or the company, the disposer shall be deemed to have
acquired the asset at an acquisition price equal to the
acquisition price paid by the transfer or plus the permitted
expenses incurred by the transferor or, if the asset was
acquired by the transfer or prior to 1 January 1970, the
market value of the asset as at 1 January 1970 plus the
permitted expenses incurred by the transferor as from
1 January 1970 less the sum of the kind referred to in
paragraph 4(1)(a), (b) or (c) received by or forfeited as
the case may be to the transferor as from 1 January
1970;”; and

(i) by substituting for the words “payment as stipulated in

the agreement)” in subparagraph 24(3) the words “payment)
as stipulated in the agreement”.

Amendment of Schedule 5

15. Part I of Schedule 5 to the principal Act is amended—

(a) by deleting the words “or thereafter” appearing after the
words “acquisition of the chargeable asset”; and
(b) by inserting at the end of that Part the following:
“Disposal in the seventh year after the
date of acquisition of the chargeable
asset or thereafter … ... Nil.”.

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LAWS OF MALAYSIA

Act 264

FINANCE ACT 1982

LIST OF AMENDMENTS

Amending law Short title In force from

– NIL –

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LAWS OF MALAYSIA

Act 264

FINANCE ACT 1982

LIST OF SECTIONS AMENDED

Section Amending authority In force from

– NIL –

DICETAK OLEH
PERCETAKAN NASIONAL MALAYSIA BERHAD,
KUALA LUMPUR
Adam Haida & Co
BAGI PIHAK DAN DENGAN PERINTAH KERAJAAN MALAYSIA

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